Cato Institute scholars first proposed health savings accounts in the 1980s and were leaders in popularizing them among the public and policymakers. Although health savings accounts do not eliminate the price distortions that follow from the differential tax treatment of employer-provided health benefits, they greatly reduce the incentives for third-party payment.

By habituating Americans to controlling their own health care, health savings accounts can mitigate the fear and dislocation that would result from going directly from the current system to one in which third-party payment receives no government encouragement.